After years of delay, the government is finally edging closer to a contract with an Australian construction giant to build the new Dunedin hospital, the ODT understands.
Te Whatu Ora Health New Zealand (HNZ) is expected to send CPB Contractors a letter saying it plans to hire the firm to construct the inpatient building.
However, there are hurdles that mean the process could take longer, including getting an implementation business case through legally required Treasury approval.
The re-employment of former programme director Tony Lloyd in Mr Davies’ team raises the likelihood that the proposed contract will have fine print that shares at least some of any overspend risk between government and CPB, rather than HNZ paying a fixed price set in advance.
Mr Davies, Mr Lloyd and senior CPB executives are known to have all favoured a shared-risk deal when discussing possible contracts
three years ago.
Responding on social media to a post by a CPB legal adviser about the problems of fixed-price contracts, Mr Lloyd said he "fully agreed".
Fixed-price contracts are usually priced higher to protect the contractor against any rising costs but, depending on construction prices and other variables, are no guarantee that a project’s costs will be contained.
One independent construction expert - who did not wish to be named - said the type of contract would make little difference to the job’s price compared with the cost of the lengthy delays to date.
"It will be six of one and half a dozen of the other," they said.
However, a shared-risk arrangement could prevent pricey legal pain down the track. CPB and the government have had various scuffles, including time in the High Court over escalating costs of a sports centre build in Christchurch.
Meanwhile, the foundations of the inpatient building are likely to get under way.
Health Minister Simeon Brown told the ODT that capping of the 324 piles already on the site would start soon, followed by work on the perimeter of the basement to form the base for the substructure.
"The third part of the process will be installing the base isolators and then the frame of the main construction," he said.
HNZ did not answer a question about the letter of intent to CPB but said that "commercial and delivery arrangements for the inpatient building are continuing to progress."
